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Bank of China International commodity unit plans to boost Chinese, European business

By Melanie Burton

HONG KONG (Reuters) - Bank of China International (BOCI) plans to boost its commodity business by tapping a latent investor base in China and broadening its drive into Europe.

The investment banking arm of state-backed Bank of China (3988.HK), the country's No.4 lender by assets, became the first Chinese member of the London Metal Exchange in 2012, pushing into commodities near the height of a demand boom.

"Hopefully for the next five years, we'll get into the next stage (in our commodity business) which is to expand our products and our service capability so we can become a key player in the landscape," said Arthur Fan, managing director of BOCI's global commodities arm.

"Supporting Chinese clients, that is where we have an edge. We regard ourselves as an international player, not from China or Hong Kong. Commodities is a global business, and with a global platform we will tap into those local players."

BOCI set up the unit in 2010 to serve its Chinese customers with an energy hedging business in Hong Kong, before opening in London, New York, Singapore and Shanghai's free trade zone, focussing on energy, as well as base and precious metals. At the time, however, market participants said it was slow to build on momentum.

Having launched an oil index product last year, BOCI plans to expand its index and structured products business for institutional and private wealth clients in China, from its own private banking base in Hong Kong, and through its parent's customers on the mainland.

Further afield, BOCI is looking to expand its financing business for commodity clients, in repurchase agreements and for offtake and prepayments. In Europe, it will also rely on Bank of China's branches for introductions to new clients.

"These next two years, we will start aggressively expanding our European clients," Fan said on Monday, adding that a mix of Chinese and Europeans on his London team should increase business with firms in the continent, such as in hedging for automakers.

Fan moved back to Hong Kong this year after five years in London.

Within Asia, BOCI is readying its business for the internationalisation of the yuan, which Fan sees in the next 2-3 years.

(Reporting by Melanie Burton; Editing by Joseph Radford)